I heard a talk today at one of the many marginally useful meetings on vacancies in St.Louis. The discussion was about green lining, an effort to artificially prop up property sales by financing the gap between appraised value and total development costs on single family houses.
The issue as presented seems dubious; that tons of people are waiting to do major rehab to houses on the north side who can’t get the appraisal they would need. The green lining program would put together a pool of institutional funding that would provide second mortgages to fund the appraisal gap.
There are several problems with this approach. The first problem is that the homebuyers would immediately be under water. What if they want to sell the property and cannot pay off the mortgage. Second, the proposal does not address credit issues which I think are a bigger problem than appraisals. The program should go all the way and guarantee the purchaser’s equity. But the real issue is creating demand in an area with high crime and poor schools. Written by Paul Dribin